California Supreme Court Decision Breaks New Ground In Confirming Broad Federal Preemption of State Disclosure Requirements

Late last week, the California Supreme Court issued a decision in a case of major importance to the banking industry: Parks v MBNA America Bank, N.A., No. S183703, 2012 WL 2345006 (Cal. June 21, 2012). In a unanimous opinion, the Court held that the claim brought by the plaintiff, Allan Parks, on behalf of a putative class of California credit card customers of MBNA America Bank, N.A. (now FIA Card Services, N.A., an indirect subsidiary of Bank of America Corporation), was preempted by federal law - specifically, the National Bank Act (NBA), 12 U.S.C. § 21 et seq.

The decision is significant in several key respects, including:

• It brings California case law in line with favorable U.S. Supreme Court precedent on federal banking law preemption, mitigating the lingering ill-effects of previous California Supreme Court decisions on the issue.
• It underscores that the NBA preempts not only state laws that actually bar or proscribe particular activities undertaken by national banks pursuant to their federally granted powers, but also state laws that implicitly have the effect of conditioning the exercise of a national bank's powers on compliance with state law.
• It explicitly rejects the notion, advocated by certain preemption opponents and proffered by certain courts, that factual evidence is required to establish preemption under the NBA; and
• It confirms that even where a single state's law may not appear to create substantial compliance burdens, it may be preempted on the ground that the potential enactment of similar but not identical laws by other states (or localities) would significantly interfere with a national bank's ability to operate efficiently on a multistate basis.